OCR unchanged at 5.75 per cent

4 July 2001

The Reserve Bank today left the Official Cash Rate unchanged at 5.75 per cent.

Reserve Bank Governor Don Brash commented: "Inflation pressures since the OCR was reduced to 5.75 per cent in May are largely unchanged.

"The world economy is weak. The short-term outlook for most of our trading partners is deteriorating, although there are better signs in Australia. However, offsetting these factors, most export prices remain high, partly because of the low exchange rate.

"Investment in New Zealand has been relatively weak, but consumer spending has remained relatively robust. Overall, inflationary pressures don't seem to have changed much. In the May 2001 Monetary Policy Statement, we thought these pressures were roughly neutral.

"Many inflation measures are still higher than is consistent with our target, but most of the recent signs suggest inflation will fall back into the target range over the next year or so.

"There are, however, risks. March GDP growth was slightly weaker than expected, although previous quarters were revised up, reducing the impact of the March number. The fact that export volumes have not responded strongly to the low dollar and high world prices may mean that the global slowdown is having more impact that previously thought. Whether these downside risks warrant a further cut in the OCR will be re-examined in the August Monetary Policy Statement," Dr Brash concluded.

ENDS

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